EXERCISE 12-5 Utilizing a Constrained Resource [LO12-5] Outdoor Luggage Inc. makes high-end hard-sided luggage for sports equipment. Data concerning three of the company's most popular models appear below. Ski Guard Golf Guard F ishing Guard $200 $300 $140 $60 $255 $55 Selling price per unit ......... Variable cost per unit ......... Plastic injection molding machine processing time required to produce one unit ... Pounds of plastic pellets per unit ................. 2 minutes 7 pounds 5 minutes 4 pounds 4 minutes 8 pounds Required: 1. The total time available on the plastic injection molding machine is the constraint in the pro- duction process. Which product would be the most profitable use of this constraint? Which product would be the least profitable use of this constraint? A severe shortage of plastic pellets has required the company to cut back its production so much that the plastic injection molding machine is no longer the bottleneck. Instead, the constraint is the total available pounds of plastic pellets. Which product would be the most profitable use of this constraint? Which product would be the least profitable use of this constraint? 3. Which product has the largest unit contribution margin? Why wouldn't this product be the most profitable use of the constrained resource in either case?
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Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. Data concerning three of the companyâs most popular models appear below.
| Ski Guard | Golf Guard | Fishing Guard | ||||||||||
| Selling price per unit | $ | 300 | $ | 380 | $ | 225 | ||||||
| Variable cost per unit | $ | 160 | $ | 170 | $ | 75 | ||||||
| Plastic injection molding machine processing time required to produce one unit | 7 minutes | 6 minutes | 4 minutes | |||||||||
| Pounds of plastic pellets per unit | 11 pounds | 13 pounds | 6 pounds | |||||||||
1. If we assume that the total time available on the plastic injection molding machine is the constraint in the production process, how much contribution margin per minute of the constrained resource is earned by each product? (Round your final answers to 2 decimal places.)
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2. If we assume that a severe shortage of plastic pellets has required the company to cut back its production so much that its new constraint has become the total available pounds of plastic pellets, how much contribution margin per pound of the constrained resource is earned by each product? (Round your final answers to 2 decimal places.)
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Outdoor Luggage Inc. makes high-end hard-sided luggage forsports equipment. Data concerning three of the companyâs mostpopular models appear below. |
| Ski Guard | Golf Guard | Fishing Guard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sellingprice per unit | $220 | $380 | $225 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable cost perunit | $100 | $110 | $115 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Plastic injectionmolding machine processing time required to produce one unit | 5 minutes | 9 minutes | 8 minutes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pounds of plasticpellets per unit | 14 pounds | 8 pounds | 6 pounds | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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